TOKYO - Hong Kong's private sector economy index continued to worsen further to sunk to its lowest for nearly three years in May, due to a decline in sales to mainland China. Business activity shrank, which led firms cut back on purchasing activity and stock holdings.
The Nikkei Hong Kong Purchasing Manager's Index, or PMI, fell from 48.4 in April to 46.9 in May, signaling its lowest level since June 2016. A reading above 50 indicates an expansion while a reading below 50 points to a contraction.
U.S.-China trade frictions dampened client demand in China. New business from mainland decreased for a thirteenth straight month during May. Lower client demand saw business activity contracting further, which prompted firms to scale back on input purchases and cut inventories.
"The latest Nikkei PMI survey signaled an increasingly gloomy outlook for Hong Kong's private sector businesses in the middle of the second quarter," said Bernard Aw, economist at IHS Markit, which compiles the survey.
"The re-escalation of US-China trade tensions boded ill for the Hong Kong economy" as China is the territory's largest export destination, accounting for over half of Hong Kong's total exports, according to Aw. "Consequently, business expectations for output in the year ahead remained pessimistic."
For more information,visit IHS Markit website.